2. Use the financial statements presented below on ABC Ltd. to answer the questions.

ABC Ltd. (Modified)

CONSOLIDATED BALANCE SHEETS

(in millions, except per share data)

December 31,

2012 2011

ASSETS

Current assets:

Cash and cash equivalents $ 8,084 $ 5,269

Marketable securities 3,364 4,307

Inventories 6,031 4,992

Accounts receivable, net and other 3,364 2,571

Deferred tax assets 453 351

Total current assets 21,296 17,490

Property and equipment, net 7,060 4,417

Deferred tax assets 123 28

Goodwill 2,552 1,955

Other assets 1,524 1,388

Total assets $32,555 $25,278

LIABILITIES AND STOCKHOLDERS EQUITY

Current liabilities:

Accounts payable $13,318 $11,145

Accrued expenses and other 5,684 3,751

Total current liabilities 19,002 14,896

Long-term debt 3,084 255

Other long-term liabilities 2,277 2,370

Commitments and contingencies

Stockholders equity:

Preferred stock, $0.01 par value:

Authorized shares 500

Issued and outstanding shares none

Common stock, $0.01 par value:

Authorized shares 5,000

Issued shares 478 and 473

Outstanding shares 454 and 455 5 5

Treasury stock, at cost (1,837) (877)

Additional paid-in capital 8,347 6,990

Accumulated other comprehensive loss (239) (316)

Retained earnings 1,916 1,955

Total stockholders equity 8,192 7,757

Total liabilities and stockholders equity $32,555 $25,278

(a) Why do companies like ABC Ltd. purchase its own shares? (State three reasons)

(b) Calculate the ratio of debt to assets for 2011 and 2012, and discuss the implications of the change.